A-LEVEL-ECONOMICS-SECTION
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Transcript A-LEVEL-ECONOMICS-SECTION
A LEVEL ECONOMICS
SECTION 1
REVISION NOTES
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Scarcity
A situation when a choice is to be made
Everyone in this world has to face this
situation of scarcity
It gives rise to the basic economic
problem
– Scarce/limited resources and unlimited wants
Choices at all levels
Individuals
Firms
Governments
Individuals
The individuals are forced to make a
choice
Example
An individual may have to chose whether
to buy a shirt or a pant
Firms
Firms are also forced to make choices
Example
A firm may have to chose whether to
spend the money or marketing
department or research and development
department
Governments
Governments which are considered all
powerful too have to make choices
Eg.
Government has to make a choice
whether to spend the public money on
defense or healthcare
Opportunity cost
The next best alternative foregone when a
choice is made
Opportunity cost is never in money value
The benefits which could have been
received by taking an alternative action.
3 Basic Questions
What to produce
How to produce
For whom to produce
Different Allocative Mechanisms
Market economies
Planned economies
Mixed economies
Market economies
Market economy is an economy where
resources are allocated by the price
mechanism, the consumers determine
what is produced.
Very less role of the government
Eg. United states
Planned economies
Planned system is an economic system
where resources are allocated by the, the
state determines what is going to be
produced.
No consideration given to market forces or
the businesses
Eg. USSR
Mixed economies
A form of economy which combines the
good features or advantages of market
and planned economy
Business activity controlled by market
forces
The government provides the essentials:
education, health and security
Eg.
Production Possibility Curve(PPC)
It is a graph that shows the different rates
of production of two goods and/or
services that an economy can produce
efficiently during a specified period of time
with a limited quantity of productive
resources
The margin: decision making at the
margin
Positive statements
Actual facts and figures which are both
measurable and comparable
Normative statements
Opinions or suggestions
Often called judgements
Ceteris paribus
Factors of production
Land
Labour
Capital
Enterprise
Land
Natural occurring resources used for
production purpose
Eg.
Earth on which mills are built
Water in which fish is found
raw materials used to produce goods
Labour
Manual and mental effort to produce or
deliver goods and services
People who are willing or able to work are
known as labour work force.
Eg. Clerks
Computer technician
O level economics teacher
Capital
Manmade goods to produce other goods
and services
Capital is classified into capital goods and
consumer goods
Eg.
Machines
Factories
Roads
Enterprise
The people who bring the other 3 factors
of production together to produce goods
and services.
In this process they do the decision
making and risktaking
Eg
Businessmen
Division of labour
Money
Characteristics of Money
Functions of Money
Efficient resource allocation
Economic efficiency
Productive efficiency
Allocative efficiency